Significant Events During the Reporting Period

On July 6, 2017 Bittium announced that the Finnish Minister of Defence Jussi Niinistö had authorized Finnish Defence Forces to purchase Bittium Tactical Wireless IP Network™ (TAC WIN) system products. Bittium and Finnish Defence Forces plan to sign a Framework Agreement for the delivery of Bittium TAC WIN products, that covers years 20182020, with the total value of the agreement being EUR 30 million (excl. VAT) if materialized in full. According to the Framework Agreement, Finnish Defence Forces would issue separate purchase orders for the products each year. The Framework Agreement did not change Bittiumīs financial outlook for the year 2017.

The Framework Agreement was told to be a continuation to the long cooperation between Finnish Defence Forces and Bittium. It will continue the renewal of the Finnish Defence Forcesī command, control and communications system, where the Software-Defined Radio based Bittium TAC WIN system acts as the backbone for tactical data transfer. The Framework Agreement was signed on August 9, 2017.

On August 8, 2017 Bittium announced that Bittium Wireless Ltd, a subsidiary of Bittium Corporation, and the Finnish Defence Forces have signed a Letter of Intent concerning the purchase of new software defined radio (SDR) based tactical radios and the preparations of the purchase. The Letter of Intent encompasses products belonging to the new Bittium Tough SDR product family: tactical handheld radio Bittium Tough SDR Handheld™ and tactical vehicular radio Bittium Tough SDR Vehicular. According to the Letter of Intent, Bittium will develop the products with their own R&D investments and the Finnish Defence Forces will support the development work by ensuring that the products are suitable for their purposes and by making preparations for the purchase of the products.

The Letter of Intent does not bind the parties into making a purchase agreement. Making the purchase agreement requires that the Finnish Ministry of Defence first authorizes the purchase, based on which Bittium and the Finnish Defence Forces would then make a separate purchase agreement. Based on the Letter of Intent, if materialized in full, the total value of the purchase agreement would be approximately EUR 130 million distributed over about 10 years. The Letter of Intent is in force until the binding purchase agreement comes into effect or until December 31, 2019. Should the purchase materialize in full, it would have a significant impact on Bittiumīs net sales from the year 2019 onward. The Letter of Intent did not change Bittiumīs financial outlook for the year 2017. The Letter of Intent continues the long-term cooperation between the Finnish Defence Forces and Bittium in developing the performance of the command and control (C2) systems and the supporting software defined radio technology of the Finnish Defence Forces.

On October 10, 2017 Bittium Corporation lowered its financial guidance for the year 2017. The reason for this was the delay in the first phase of the product deliveries for the Mexican Mexsat satellite phone system, to be mainly executed in 2018 due to the internal reasons of Mexican governmental customers. Bittium had expected earlier those product deliveries to be executed during the second half of 2017.

Bittium announced that it expects that the net sales in 2017 will be lower than in the previous year (EUR 64.2 million, in 2016).

The operating result was expected to be clearly negative (EUR 2.5 million, in 2016). In the Half Year Financial Report January-June 2017, published on August 9, 2017 Bittium still expected that the net sales in 2017 will be at the same level as in the previous year (EUR 64.2 million, in 2016) and the operating result to be negative (EUR 2.5 million, in 2016).

The decline in the amount of the product deliveries of the Mexsat mobile devices in 2017 did not change Bittiumīs long-term growth outlook. The year 2017 had already been expected to be challenging mainly due to the termination of significant customer cooperation with a global network equipment manufacturer.